Correlation Between Global X and Invesco DWA

Can any of the company-specific risk be diversified away by investing in both Global X and Invesco DWA at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Global X and Invesco DWA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global X Cloud and Invesco DWA Utilities, you can compare the effects of market volatilities on Global X and Invesco DWA and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Global X with a short position of Invesco DWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Invesco DWA.

Diversification Opportunities for Global X and Invesco DWA

0.18

Correlation Coefficient

Global X  Invesco DWA

Average diversification

The 3 months correlation between Global and Invesco is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Global X Cloud and Invesco DWA Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Utilities and Global X is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Global X Cloud are associated (or correlated) with Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Utilities has no effect on the direction of Global X i.e., Global X and Invesco DWA go up and down completely randomly.

Pair Corralation between Global X and Invesco DWA

Given the investment horizon of 90 days Global X Cloud is expected to under-perform the Invesco DWA. In addition to that, Global X is 1.78 times more volatile than Invesco DWA Utilities. It trades about -0.27 of its total potential returns per unit of risk. Invesco DWA Utilities is currently generating about 0.18 per unit of volatility. If you would invest  3,976  in Invesco DWA Utilities on December 2, 2024 and sell it today you would earn a total of  124.00  from holding Invesco DWA Utilities or generate 3.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Global X Cloud  vs.  Invesco DWA Utilities

Global X Cloud

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X Cloud has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Global X is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco DWA Utilities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco DWA Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Invesco DWA is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Global X and Invesco DWA

The main advantage of trading using opposite Global X and Invesco DWA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, Invesco DWA can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Invesco DWA will offset losses from the drop in Invesco DWA's long position.

The idea behind Global X Cloud and Invesco DWA Utilities pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the CEOs Directory module to screen CEOs from public companies around the world.